Sprint, Clearwire in WiMax VentureTwo wireless phone companies, Sprint Nextel and Clearwire, have come together to place a huge bet on a wireless technology called WiMax. WiMax would provide full Internet access for cell phones and laptops at speeds much faster than what's available today.

Sprint, Clearwire in WiMax Venture

Two wireless phone companies, Sprint Nextel and Clearwire, have come together to place a huge bet on a wireless technology called WiMax. WiMax would provide full Internet access for cell phones and laptops at speeds much faster than what's available today.

MELISSA BLOCK, host:

Today, Sprint Nextel said it's joining forces with some of the world's most famous internet and cable giants to start a new kind of wireless company. Among the investors are Intel, Google, Comcast, and Time Warner Cable.

This new firm will be built around what's called WiMax technology. It allows cell phone users to connect to the Internet at much faster speeds that they can today.

But as NPR's Jim Zarroli reports, the cost of building that new network promises to be huge.

JIM ZARROLI: Jerry Bianchi(ph) can sit in a park in Manhattan on a beautiful spring afternoon and access the Internet just as though he were in his office. He uses a card made by Verizon that plugs into his laptop. Essentially he surfs the Net over the same network that carries his cell phone calls. Bianchi, who works as IT manager, says he likes the system but it isn't perfect. For one thing, it's slower than his home DSL line.

Mr. JERRY BIANCHI: There are spots where like a cell phone would be if you go through certain areas, like I said, I used it on the train, so you go through certain areas, you might hit a dead zone and it drops you off. It gets a little frustrating.

ZARROLI: To Sprint Nextel, Internet users like Bianchi represent a huge potential market for wireless services. The company said it was combining its broadband wireless unit with that of Clearwire, the startup company founded by cell phone pioneer Craig McCaw. The company will be called Clearwire, although Sprint Nextel will own a majority of its shares. Chief executive officer Ben Wolff told analysts the new venture would give consumers a level of wireless services they haven't seen.

Mr. BEN WOLFF (Sprint Nextel): Customers want both a true broadband experience and mobility when it comes to their communication services. Until now, they've had to settle for one or the other. We intend to change that by building one of the fastest and most capable wireless networks ever conceived.

ZARROLI: The company plans to build that network using the new technology called WiMax. So far WiMax technology has been tried in just a few places, but analyst Michael Nielsen of Stanford Group says it appears to have a lot of potential.

Mr. MICHAEL NIELSEN (Analyst, Stanford Group): The promise of WiMax is to have really the Internet any time, any place, on the go, completely mobile with an open platform, so that virtually any type of consumer electronic device or appliance with a WiMax-embedded chip set can access the Internet.

ZARROLI: But Nielsen and other analysts say there are also big questions about whether the venture can succeed. For one thing, Sprint Nextel's competitors, Verizon and AT&T, are developing their own new wireless technology called LTE, that can be built over their existing network. Clearwire will have to spend a lot more money to build its network. The company has received capital from several big name companies, but analyst Roger Entner of IAG Research says the money pledged so far probably won't go far enough.

MR. ROGER ENTNER (IAG Research): The funding that Clearwire has now is undoubtedly impressive, with, you know, $3.2 billion. They still have to raise a lot more money to actually build this out.

ZARROLI: Some analysts also note that Clearwire's complex ownership structure could make managing the company difficult. Among those helping to finance the network will be Google, Time Warner and Comcast; all of them have their own interests in wanting to see WiMax technology succeed. If Clearwire is to gain a share of the growing wireless market, it will have to satisfy a lot of competing demands.

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Broadband on the Go

The race to establish a nationwide mobile broadband network accelerated on Wednesday with the announcement by Sprint Nextel and Clearwire that they would merge their WiMax businesses into a new company under Clearwire's name.

Executives say the $12 billion deal, which needs federal approval to move forward, is backed by a group of five leading technology and communications companies, including Intel Corp., Google Inc., Comcast Corp., Time Warner Cable Inc. and Bright House Networks. The group will collectively invest $3.2 billion in the new company, which will be based in Kirkland, Wash. The investment is based on a target price of $20 per share for Clearwire's common stock. Sprint will own 51 percent of equity in the new company. The five corporate investors will collectively own 22 percent of the company and existing Clearwire shareholders will own the remaining 27 percent.

What is WiMax?

Imagine being able to have your high-speed home Internet connection follow you across a broad metropolitan area — whether you're at home, at work, walking around or in your car. That's WiMax and it has the potential to transform how people communicate over voice and data networks. "It will be a metro zone versus a hotspot. So we'll cover entire city areas," says Scott G. Richardson, chief strategy officer for Clearwire. The service will allow users to tap into a high-speed connection even when they're away from home, he says.

WiMax is an acronym for worldwide interoperability for microwave access and the technology began to evolve in 2003 from the same standards used to create Wi-Fi.

What kind of devices will work with WiMax?

Any devices that currently have the potential to access the Internet could become a platform for WiMax. They just need a special chip. So laptops, cellular phones, gaming devices, cameras, PDAs, mp3 players and cars are all possible interfaces.

Berge Ayvazian, chief strategy officer for the Yankee Group, says the new frontier for WiMax is likely in a range of devices where people are not directly involved in manipulating the hardware, such as E-Z Pass machinery on highways. "Those kind of networks that are capturing data, capturing transactions — that are embedding broadband in devices that are not tied to people — that's where the market is really going to expand."

Will WiMax create competition for cell companies?

Analysts say that the new Clearwire is likely to generate stiff competition for cell phone companies like Verizon Wireless and AT&T Wireless. These companies are developing their own version of mobile broadband called LTE, or long-term evolution, but they are a few years behind in development.

Today, most cellular networks in the U.S. operate on a 2G or 3G — second- or third-generation — network. But the U.S. was slow to adapt the third-generation technology, Richardson says. Because WiMax is a 4G, or fourth generation, network designed to foster Internet and mobile broadband usage, it "puts the United States back in the driver's seat" as a leading technology adapter, he says.

When and where will it be available?

The two companies — Sprint and Clearwire — have been testing WiMax in some markets including Baltimore, Chicago, Portland, Ore., and Washington, D.C. The new Clearwire expects to offer service in the top 100 cities after they receive federal approval, Richardson says.

How much will the WiMax service cost?

Clearwire has yet to announce how much the service will cost. "We have always been focused on building a network that will provide the lowest cost per megabyte," says Atish Gude, the senior vice president for mobile broadband operations for Sprint's WiMax business called XOHM. Ayvazian estimates the service will cost as much as $15 more than what customers are presently paying for broadband cable Internet in their homes.

Who is the target audience for this service?

Entire families are likely to subscribe to the service. Overall, it may translate into savings for individuals who will ultimately be able to carry broadband service with them wherever they go. "Consumers are now wasting time and money by leaving it at home," says Ayvazian.

Are there any WiMax devices available to buy now?

No. But they're on the way. Ultra mobile PCs and smartphones with WiMax are likely to surface this summer from companies such as Samsung, Motorola and Nokia (among others), says Ayvazian. They may find their way into retail outlets by the fall.